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Private equity ownership in sports has proliferated in recent years across professional leagues in both North America and abroad, and it’s not hard to understand why.
The average NFL franchise is now worth $7.4 billion, according to Sportico valuations released Wednesday, up a record 31% from last year alone. That’s a type of guaranteed return on investment that private equity firms, venture capital companies or basically anyone can’t find in any other asset class on earth. As of May, the CFA Institute found 74 North American pro sports teams where institutional investors held stakes, “driven by predictable revenues, rising franchise values and stable long-term returns.”
Apollo Sports Capital had bought a majority stake in Atletico Madrid and a minority stake in Ryan Reynolds’ Wrexham before a Tuesday deal with the New York Yankees that saw a $2.6 billion investment for a minority stake in the team at a reported $10 billion valuation that includes a board seat for Apollo Sports Capital CEO Al Tylis. (Yahoo is owned by Apollo Global Management.) MLB rules limit private equity ownership stakes in its teams to 30%, with one fund only allowed to own 15% of a team. NBA and NHL teams have the same 30% limits, but individual funds can own up to 20% of a single team.
On Wednesday, a group led by Bob Iger, Josh Kushner and Kushner’s Thrive Eternal agreed to purchase a majority stake in the Los Angeles Lakers for a sports record $12.5 billion from Guggenheim Partners CEO Mark Walter, whose $10 billion Laker purchase was only approved by the NBA’s Board of Governors last October. Owners tied to private equity funds reportedly hold stakes in 20 of the 30 franchises, and that number is only trending higher.
“To go from a $10 billion valuation one year ago to $12.5 billion a year later is fascinating, but not completely surprising for what is sort of a crown jewel franchise,” Jeff Shaffer, the managing director at Alvarez & Marsal’s private equity services division, which specializes in pre- and post-acquisition operations assessment and integration. Shaffer led the carve-out of the YES Network from Fox and Disney in 2019, and boasts clients including major franchises in all North American pro leagues.
ESPN reported that the deal to sell the Lakers came together in just 72 hours, seemingly without some sort of auction process to extract even more value, which could have been caused by Walter and his conglomerate, TWG Global, being under investigation by the DOJ and SEC.
“It really shows the liquidity that exists in pro sports right now,” Greg Bettinelli, a partner at The Chernin Group, a growth equity fund that has bought and sold stakes companies ranging from Slack, Oura and Ro to Barstool Sports and The Action Network, told Yahoo Sports. “Where a $12.5 billion deal can get done in three days. That’s how you know there’s a level of sophistication of investors and the appetite to put money in and around big sports teams.”
Mark Walter purchased the Lakers from the Buss family a year ago for $10 billion. He sold them for $12.5 billion a year later.
Allen Berezovsky via Getty Images
The NFL finally allowed an approved list of institutional investors to buy up to 10% stakes in teams in October 2024, with KKR-owned Arctos Sports Partners holding small stakes in the Buffalo Bills, Cleveland Browns and Los Angeles Chargers. Arctos boasts a 30-team portfolio that includes everyone from the Los Angeles Dodgers and Liverpool FC to the Golden State Warriors, Utah Mammoth and Aston Martin’s Formula 1 team. Other companies like RedBird Capital, Blue Owl, Ares Capital and Clearlake Capital are seeing valuations increase at a strong, steady rate when buying these minority, passive stakes in teams.
But the broader purpose of private equity funds is to deliver return on investment on its assets for shareholders. And the only way to truly bring that ROI to real life rather than just on paper is to exit the investment. So why haven’t these private equity funds exited and sold their stakes in these sports teams?
Firstly, Shaffer said, there’s a limited market to purchase these assets from the PE funds willing to sell. But he’s also seen more of a willingness to hold on to investments for longer periods of time, especially if they’re seeing valuations in an asset increase in the way sports teams have in recent years. Previously, exits after three or four years was an industry norm.
“The investment community is now a little bit more patient, especially when you're in funds that hold these crown jewel assets,” Shaffer said. “The overall valuation of these assets will continue to probably rise for the foreseeable period, like the $12.5 billion for the Lakers. Watch the next team that comes around. The Knicks or whatever team would be right around that mark. Look at how fast the Seattle Seahawks traded at a $9 billion valuation.”
The estate of the late Paul Allen bought the Seahawks for $200 million in 1997.
Wyc Grousbeck and Steve Pagliuca purchased the Boston Celtics for $360 million in 2002 before selling last year at a $6.1 billion valuation that’s now less than half of what the Lakers sold for. There’s a lot of value in holding the assets and reaping the eventual benefits by being patient.
These values continue to rise because when it comes to predictable revenue streams, Bettinelli said, from sponsorship, ticketing, merchandise, media, guaranteed live TV audiences and the value of sports teams’ IP. There’s an amount of stability that few asset classes possess that may make sports franchises undervalued, in a sense. Media rights deals are still very strong, like the NBA’s 11-year, $76 billion contract with Disney, Comcast and Amazon that began last year. The NBA just set an all-time attendance record over a three-year period and last year MLB attendance rose for a third straight year, the first time that’s happened since 2005-2007. There’s still tremendous power, Shaffer believes, in sports’ live nature.
“So many things are going to AI,” he said. “Sports is the one thing that you experience in the here and now. That is not going to go away. The immediacy of sports has value in and of itself.”
If you can hold on to an asset that appreciates like that, why even consider selling?
In some cases, Bettinelli said, institutional investors have obligations to stakeholders and limited partners to deliver a certain return on investment over a given period of time. Often, asset hold periods for private equity investments are in the six to 10-year range.
“We just haven't hit that threshold yet [with many of these PE purchases],” he said. One loophole around that is an instrument called a continuation fund, where companies in effect sell assets to themselves in the form of a somewhat new set of investors, getting to choose whether they want to continue to invest in something or simply exit and cash out.
What companies like The Chernin Group look for when selling an asset, Bettinelli said, is being opportunistic and looking for an outsize return.
“When you have a company that's doing very well and there’s some irrationality in the market,” he said, “meaning somebody really wants an asset that you own, they may be willing to pay a price that we thought exceeded where the market value was at the time. So you take advantage of that.”
There have been some examples of that in past sports PE exits. As part of Mat Ishbia’s $4 billion purchase of the Phoenix Suns in 2023, Blue Owl’s Dyal HomeCourt Partners sold its 4.9% stake in the team after buying in at a $1.5 billion valuation in 2021. Arctos sold part of its minority stake in the Tampa Bay Lightning in 2024 at a valuation close to $2 billion after buying that stake less than two years earlier at a $1.4 billion valuation.
Sometimes, Bettinelli said, you’ve helped build a business with great leadership and predictability to the point where it’s at a premium in the market and you’re in a good place where you think you can sell at maximum value. That’s what he believes the thought process was when Mark Cuban sold a majority stake in the Dallas Mavericks in 2023 for $3.5 billion.
Sometimes, however, when a team sells for such a high price like the Lakers, Shaffer thinks that that deal could cause some churn and activity where there are some private equity sales in teams because the numbers are getting too good to resist.
“People who bought in two, three years ago, and see these valuations skyrocketing,” Shaffer said, “will be tempted to get a quick return for their limited partners.”
Could these valuations ever decrease and create panic in the market for private equity and other investors? There’s always a chance for what Shaffer called a black swan event, like a pandemic or a recession, some security catastrophe, tariffs, political event or war impacting profits. Perhaps a league hits its saturation point in terms of generating television revenue or hits some sort of cap on how much revenue it can generate. Right now it seems like valuations are only going to rise and private equity groups will continue to benefit from holding on to their assets.
“When,” Bettinelli asked, “do we hit the peak of the peak?”
For companies who aren’t getting out while the market is hot, the answer to that question could prove costly if valuations one day hit a ceiling that is currently far from anything we can see in the sports business landscape.
Continue reading...
The average NFL franchise is now worth $7.4 billion, according to Sportico valuations released Wednesday, up a record 31% from last year alone. That’s a type of guaranteed return on investment that private equity firms, venture capital companies or basically anyone can’t find in any other asset class on earth. As of May, the CFA Institute found 74 North American pro sports teams where institutional investors held stakes, “driven by predictable revenues, rising franchise values and stable long-term returns.”
Apollo Sports Capital had bought a majority stake in Atletico Madrid and a minority stake in Ryan Reynolds’ Wrexham before a Tuesday deal with the New York Yankees that saw a $2.6 billion investment for a minority stake in the team at a reported $10 billion valuation that includes a board seat for Apollo Sports Capital CEO Al Tylis. (Yahoo is owned by Apollo Global Management.) MLB rules limit private equity ownership stakes in its teams to 30%, with one fund only allowed to own 15% of a team. NBA and NHL teams have the same 30% limits, but individual funds can own up to 20% of a single team.
On Wednesday, a group led by Bob Iger, Josh Kushner and Kushner’s Thrive Eternal agreed to purchase a majority stake in the Los Angeles Lakers for a sports record $12.5 billion from Guggenheim Partners CEO Mark Walter, whose $10 billion Laker purchase was only approved by the NBA’s Board of Governors last October. Owners tied to private equity funds reportedly hold stakes in 20 of the 30 franchises, and that number is only trending higher.
“To go from a $10 billion valuation one year ago to $12.5 billion a year later is fascinating, but not completely surprising for what is sort of a crown jewel franchise,” Jeff Shaffer, the managing director at Alvarez & Marsal’s private equity services division, which specializes in pre- and post-acquisition operations assessment and integration. Shaffer led the carve-out of the YES Network from Fox and Disney in 2019, and boasts clients including major franchises in all North American pro leagues.
ESPN reported that the deal to sell the Lakers came together in just 72 hours, seemingly without some sort of auction process to extract even more value, which could have been caused by Walter and his conglomerate, TWG Global, being under investigation by the DOJ and SEC.
“It really shows the liquidity that exists in pro sports right now,” Greg Bettinelli, a partner at The Chernin Group, a growth equity fund that has bought and sold stakes companies ranging from Slack, Oura and Ro to Barstool Sports and The Action Network, told Yahoo Sports. “Where a $12.5 billion deal can get done in three days. That’s how you know there’s a level of sophistication of investors and the appetite to put money in and around big sports teams.”
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Mark Walter purchased the Lakers from the Buss family a year ago for $10 billion. He sold them for $12.5 billion a year later.
Allen Berezovsky via Getty Images
The NFL finally allowed an approved list of institutional investors to buy up to 10% stakes in teams in October 2024, with KKR-owned Arctos Sports Partners holding small stakes in the Buffalo Bills, Cleveland Browns and Los Angeles Chargers. Arctos boasts a 30-team portfolio that includes everyone from the Los Angeles Dodgers and Liverpool FC to the Golden State Warriors, Utah Mammoth and Aston Martin’s Formula 1 team. Other companies like RedBird Capital, Blue Owl, Ares Capital and Clearlake Capital are seeing valuations increase at a strong, steady rate when buying these minority, passive stakes in teams.
But the broader purpose of private equity funds is to deliver return on investment on its assets for shareholders. And the only way to truly bring that ROI to real life rather than just on paper is to exit the investment. So why haven’t these private equity funds exited and sold their stakes in these sports teams?
Firstly, Shaffer said, there’s a limited market to purchase these assets from the PE funds willing to sell. But he’s also seen more of a willingness to hold on to investments for longer periods of time, especially if they’re seeing valuations in an asset increase in the way sports teams have in recent years. Previously, exits after three or four years was an industry norm.
“The investment community is now a little bit more patient, especially when you're in funds that hold these crown jewel assets,” Shaffer said. “The overall valuation of these assets will continue to probably rise for the foreseeable period, like the $12.5 billion for the Lakers. Watch the next team that comes around. The Knicks or whatever team would be right around that mark. Look at how fast the Seattle Seahawks traded at a $9 billion valuation.”
The estate of the late Paul Allen bought the Seahawks for $200 million in 1997.
Wyc Grousbeck and Steve Pagliuca purchased the Boston Celtics for $360 million in 2002 before selling last year at a $6.1 billion valuation that’s now less than half of what the Lakers sold for. There’s a lot of value in holding the assets and reaping the eventual benefits by being patient.
These values continue to rise because when it comes to predictable revenue streams, Bettinelli said, from sponsorship, ticketing, merchandise, media, guaranteed live TV audiences and the value of sports teams’ IP. There’s an amount of stability that few asset classes possess that may make sports franchises undervalued, in a sense. Media rights deals are still very strong, like the NBA’s 11-year, $76 billion contract with Disney, Comcast and Amazon that began last year. The NBA just set an all-time attendance record over a three-year period and last year MLB attendance rose for a third straight year, the first time that’s happened since 2005-2007. There’s still tremendous power, Shaffer believes, in sports’ live nature.
“So many things are going to AI,” he said. “Sports is the one thing that you experience in the here and now. That is not going to go away. The immediacy of sports has value in and of itself.”
If you can hold on to an asset that appreciates like that, why even consider selling?
In some cases, Bettinelli said, institutional investors have obligations to stakeholders and limited partners to deliver a certain return on investment over a given period of time. Often, asset hold periods for private equity investments are in the six to 10-year range.
“We just haven't hit that threshold yet [with many of these PE purchases],” he said. One loophole around that is an instrument called a continuation fund, where companies in effect sell assets to themselves in the form of a somewhat new set of investors, getting to choose whether they want to continue to invest in something or simply exit and cash out.
What companies like The Chernin Group look for when selling an asset, Bettinelli said, is being opportunistic and looking for an outsize return.
“When you have a company that's doing very well and there’s some irrationality in the market,” he said, “meaning somebody really wants an asset that you own, they may be willing to pay a price that we thought exceeded where the market value was at the time. So you take advantage of that.”
There have been some examples of that in past sports PE exits. As part of Mat Ishbia’s $4 billion purchase of the Phoenix Suns in 2023, Blue Owl’s Dyal HomeCourt Partners sold its 4.9% stake in the team after buying in at a $1.5 billion valuation in 2021. Arctos sold part of its minority stake in the Tampa Bay Lightning in 2024 at a valuation close to $2 billion after buying that stake less than two years earlier at a $1.4 billion valuation.
Sometimes, Bettinelli said, you’ve helped build a business with great leadership and predictability to the point where it’s at a premium in the market and you’re in a good place where you think you can sell at maximum value. That’s what he believes the thought process was when Mark Cuban sold a majority stake in the Dallas Mavericks in 2023 for $3.5 billion.
Sometimes, however, when a team sells for such a high price like the Lakers, Shaffer thinks that that deal could cause some churn and activity where there are some private equity sales in teams because the numbers are getting too good to resist.
“People who bought in two, three years ago, and see these valuations skyrocketing,” Shaffer said, “will be tempted to get a quick return for their limited partners.”
Could these valuations ever decrease and create panic in the market for private equity and other investors? There’s always a chance for what Shaffer called a black swan event, like a pandemic or a recession, some security catastrophe, tariffs, political event or war impacting profits. Perhaps a league hits its saturation point in terms of generating television revenue or hits some sort of cap on how much revenue it can generate. Right now it seems like valuations are only going to rise and private equity groups will continue to benefit from holding on to their assets.
“When,” Bettinelli asked, “do we hit the peak of the peak?”
For companies who aren’t getting out while the market is hot, the answer to that question could prove costly if valuations one day hit a ceiling that is currently far from anything we can see in the sports business landscape.
Continue reading...
